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Canberra's 100% renewable energy cost lower than forecast

The cost of Canberra's renewable energy agenda peaks in 2019 at $49 million, and 2020 at $47 million, before falling away in the years that follow.

After 2026, the ACT begins to make money on the deal as wholesale electricity prices increase with the closure of coal-fired power stations.

The cost per household of renewables in 2020 is estimated at $114 a year for the average household using of 2920 GWh, a review of the scheme released by Environment Minister Shane Rattenbury this week has found. At $2.18 a week, the cost is lower than the peak predicted by the ACT government of $5.50 a week.

But the review, by consultants Jacobs, raises the spectre of the solar and wind farms pulling out of the scheme over the coming decade as the prices become uneconomic.

Ten solar and wind farm projects are being funded under the scheme, being given a guaranteed payment over 20 years for the electricity they feed into the network. The biggest player is French company Neoen's Hornsdale wind farm in South Australia, which has won three separate entitlements, providing about half the renewable power funded under Canberra's scheme.

The consultants' report points out that the operators are allowed to pull out of the scheme whenever they choose, surrendering their right to a feed-in tariff from the ACT government. And it says there is reason to expect they will, especially after 2030 when the federal large-scale renewables scheme ends.

Early surrender was "a significant likelihood", given the amount paid to renewable generators did not increase with inflation so would become less attractive over time, and given the expected rise in electricity prices, it said. But it also pointed out that "the outcome that many or all of the wind farms may surrender their FiT entitlements is only one credible scenario", given the uncertainties.

"The act allows the holder of a FiT [feed in tariff] entitlement to surrender the entitlement at any time without any repercussions. That poses a risk to the territory in case a successful proponent decides that can benefit more by participating in the broader market instead of keeping the FiT entitlement," the Jacobs report said.

"In this case, the ACT would lose its claim to the relevant emissions reduction and renewable electricity quantity, as well as needing to make-up the cost of the electricity from other sources, which may be be more expensive at that time. 

"If the project developer feels at any time that the FiT is out-of-the-money through to its 20 year term then the developer would logically surrender."

In cases were the operators' finance depended on the feed-in-tariff, though, the need to refinance would make surrender less likely, the consultants say.

They recommended the government factor in the cost to ACT customers of generators pulling out.

The government agreed, saying it would "consider amending the Large Feed-in Tariff Act in 2017 in a way that will give it time to source alternative supplies of renewable electricity if a large feed-in tariff entitlement is surrendered".

But climate change executive director Stephen Bygrave said the likelihood of surrender was low because the feed-in tariff brought long-term certainty to generators and investors.

The government is funding three solar farms and five wind farms. The wind farms are paid between $73 and $92 a megawatt hour. The solar farms are paid between $178 and $186 a megawatt hour. 

Jacobs concluded that by 2020, the projects would provide the equivalent of 76 per cent of the ACT's electricity and combined with other renewable projects, the ACT was on track to meet its 100 per cent target.

The renewables auctions had provided value for money, except for the extra payment being made to provide fudning for energy storage in the most recent auction. The auctions were highly regarded in the renewables industry and had resulted in strong competition, reducing the ACT's greenhouse gas emissions. The projects were on track.

Mr Rattenbury said from 2026 the scheme should have no net cost to Canberrans, and the generators would eventually be making net payments back to ActewAGL. While the forecast should be treated with caution, it was "a major endorsement of the design of the large feed-in tariff scheme and shows that, in the long run, ACT electricity users should not be penalised because of the territory's ambitious renewable electricity target".

Source: The Canberra Times

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